Download industrial cluster - Cluster Conference

International conference
'Changing paradigm of cluster development: Learning from global experiences‘
10th - 22th Feb. 2014, New Delhi.
China’ SEZs and Industrial Clusters:
Success and Challenges
Jici WANG
College of Urban and Environmental Studies
Peking University, 100871, China
[email protected]
1
Importance of cluster understanding

The concept of Cluster are by now well-known but
inadequately understood in policy makers as well as
entrepreneurs in China.

Yesterday. While our conference was going, over 4000
factories of footwear cluster in Wenling town of
Zhejiang province were forced to close down by local
government.

Why?

The reason is 16 workers of the Wenling footwear cluster died
in a fire accident on 14 Jan. 2014.
2
SEZs
Industrial
clusters
• Specialized town
• Development zone
• （relying on foreign
investment）
Investmentdriven
strategy
Industrial
agglomeration
• Innovative cluster vs.
Industrial cluster, (growth
pole？)
• （uneven regional
development）
• Innovative enterprises
• Regional eco-system of
innovation
• （self-sustain
development）
Innovation-driven
strategy
Efficiency
infrastructure
Innovation
infrastructure
• Industrial park
• （operation milieu）
• Science park
• （innovation milieu)）
3
High correlation
between development of cluster and real-estate in China





“Industrial cluster” and “industrial agglomeration” are
usually the excuse and vision of park development.
What is the logic behind the agglomeration and how is
China’s need for agglomeration?
The key is neither the existence of industrial
agglomeration, nor the number of clusters, and also
not new industry within a cluster.
This is important to understand the actors, how they
are and which activities in the sector’s value chain,
how is industrial linkages inside/outside the cluster.
It is urgent to concern technological innovation and
industrial upgrading.
4
FRAMEWORK
1
Economic zones
Industrial parks
2
Specialized towns /
industrial clusters
Theoretical
thinking
5
1
AGGLOMERATION PHENOMENON IN CHINA
Industrial
agglomeration
Preferential tariff
zone / park
High-tech
park
Processing
park
Industrial
cluster
Cultural
park
Supply Chain
cities
Industrial
district
Supplier
park
Industrial
complex
One
Whole product
component
Wang J. Mei L. 2009: Global-local Tensions: Trajectories and Prospects of China’s
Industrial Districts, in Giacomo Becattini (eds.) Handbook of Industrial Districts,
Edward Elgar, pp 598-613, 2009.
6

Two kinds of agglomeration in China: industrial cluster (specialized town)
from below and development zones (industrial parks) from above are
formed in the background of global offshore outsourcing of MNCs.

Traditional industry, high-tech industry, producer service industry and cultural industry in
China are all participating their global production networks. However, many activities are
still in the low value-added ones.
1
DEVELOPMENT ZONE / INDUSTRIAL PARK
8
China’s DZs development process


The idea of development zones began in 1979-1980 . It
has created China’s national GDP, more job opportunities,
and more foreign direct investment.
China has been among the top targets of global investment
1.
2.
3.
4.
5.

Foreign exchange leakage
Cost ineffectivness,
Failure to achieve state objectives
Economic crimes and related social problems.
Land is being overexploited.
China’s per capital income is still lower compare to other
countries. (According to the World Bank, China’s per capital income
in 2012 was only US$ 5680, the 94th in the 193 countries)
9
State-level and Province-level development zones
11
A timeline of science parks at state level
1984
1990
1995
2000
2005
2010
S&T Incubator (239)
University
incubator
S&T
University science park (109)
Software Park (32)
Agricultural S&T Park(38)
High and new tech development zone (108)
王缉慈
12
2009－12－14
Industrial Clusters in China: Territorial Innovation
Systems or Supply-chain Cities of the World Economy?
•
2
SPECIALIZED TOWN /
INDUSTRIAL DISTRICT / INDUSTRIAL CLUSTER
13
Remarkable specialization

The places that best
accommodate orders for
MNCs are China's giant new
specialty cities.


to buy 500,000 pairs of socks
all at once, or 300,000 neckties,
100,000 children‘s jackets, or
50,000 size 36B bras. ….

China has created giant
industrial clusters in
distinctive entrepreneurial
enclaves. Each was built to
specialize in making just one
thing:

cigarette lighters, badges,
neckties, fasteners……
Los Angeles Times: China's Strategy Gives
It the Edge in the Battle of Two Sock
Capitals (April 10, 2005)
The niche cities reflect
China's ability to form "lump"
economies, where clusters or
networks of businesses feed
off each other, building
technologies and enjoying
the benefits of concentrated
support centers.
New York Times: Textile Enclaves: In
Roaring China, Sweaters Are West of
Socks City (Dec 24. 2004)
14
14
A VIEW FROM SECTORS
15
China’s industrial clusters:
distribution in different sectors and different activities
From low-tech to high-tech
From weak creative to strong creative
Textile and apparel
Footwear
Furniture
Bicycle
Jewelry
Eyeglasses
Cigarette lighter
E-equipment
Auto parts
Notebook computers
…
Software
Animation
…
….
From manufacturing to design and R&D
16
The category of clusters (“cluster family”)

Innovative clusters (industrial districts) in traditional
sectors


Becattini G. (1990), “The industrial district as a socioeconomic notion”, in
Pyke F. and Sengenberger W., Industrial districts and interfirm cooperation,
(ILO Geneve).
Innovation clusters in high-tech sectors

OECD. Innovation Clusters: Drivers of National Innovation systems. Paris:
OECD. 2001

Creative clusters in cultural sectors and digital cultural
sectors

Non-innovative survival clusters

Mario Davide Parrilli, SME Survival Clusters in Developing Countries
(With Case Studies), European School of Management 2007
A VIEW FROM DIFFERENCE SCALES
18
China’s industrial clusters:
Distribution pattern at different scales
Country
Province
City
Town
(Local network)
19
Industrial clusters in China’s in selected provinces
250
GDP(ten billion RMB)
Indus try Dis tricts
200
150
100
50
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Fu
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ia
o
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H
eb
e
n
H
en
a
he
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Z
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Ji
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Sh
G
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0
20
Clusters in Guangdong Province
21
Clusters in Provinces of Zhejiang and Jiangsu
22
Furniture industrial clusters
23
Foshan city, Guangdong Province
24
EXPERIENCE
25
Critical mass, proximity, linkage
Factor condition: R&D institutions, university education from outside the cluster
Knowledge
MNCs and joint
ventures
Opportunities
Local MSMEs
Industrial associations
Local government, banks and other
public supporting institutions
Formal and
informal
activities for
interaction
Services
Support from related ministry of central government
Global market, Technology
Training schools and
innovation centers
Experience of Chinese industrial clusters

Entrepreneurship (start-ups and spin-offs)
local entrepreneurs’ enthusiasm under the reform and
open policy, the development of local division of labor
and the follow-up impetus of the large domestic markets.
•







Township enterprises set up by rural entrepreneurs
S&T spin-offs from universities and research institutes
Spin-offs from State-owned enterprises
Strong involvement of local government
Industrial Associations are becoming stronger
The role of Specialized Market
New development of e-commerce related
agglomerations
27
27
Strong involvement of local government





Setting up colleges and schools
Making connections between universities and industries
Setting up specialized industrial parks, exhibition centers and
trade buildings
Building and financing technology innovation centers
Boosting international co-operation through twinning clusters
28
(WANG Jun, 2006)
New development of e-commerce related agglomerations

Three crucial aspects




virtual agglomeration - the so called “Industrial belt” (Chanye
dai) which acts as the B2B platform in the industrial districts,
is rapidly created by the firm Alibaba.
the agglomeration of e-commerce C2C stores is emerging in
more than 20 rural location – the so called “Taobao village”.
Covering 15000 e-shops.
as part of real estate development, the e-commerce parks are
built in many cities.
However, the flourish of e-commerce and its
agglomeration are rarely straightforward processes in
which actors are confronted with uncertainties.
29
Taobao village


Taobao villages gradually became a new force of rural
economy, in 2013, the number of Taobao villages increased to
20 which brought about 60,000 job vacancies directly and
many job opportunities in logistics and packaging industries
indirectly.
Taobao village is a unique economic phenomenon in the world.

The definition of Taobao village includes that online stores have to
account for above 10% of local families and online transaction
surpassed 10 million yuan (USD 1.64 million). These retailers in rural
areas based on Taobao C2C platform, achieved economies of scale
and synergy effects.
30
CHALLENGES
31
Challenges and Upgrading
Global Competition
Technology regime
Restrictive protectionist policies
Innovation and
Upgrading
Local Stress
Raise of production costs
Relocation
Social and environment Issues
Race to the
bottom
32
Relocation to Inner Provinces for Lower Labour Costs

Reasons causing this relocation:



The rising labour cost, land cost and environmental cost.
The resource is exhausted in some resource-based clusters.
The relocation of many SMEs from coastal industrial clusters to
the regions in the central, western and northern China for lower
labour costs will lead to a new regional division of labour within
China.
1.
Large amount of employments
•
•
Buyer-driven or contractor-driven
2.
•

high levels of informal low-wage workers
export-led growth has created jobs, but not so many
decent jobs
Engage in global production
The coastal clusters will become the outsourcers to lower-cost
inner provinces and the higher technology or design centers.
33
From Guangdong to Guizhou
Province
34
Cultivating innovation cluster:
Linking skills and pooling resources


To meet intense global competitive pressures while
avoiding the “low road” based on cost reduction and
reaping the benefits, developing core competencies
through innovation and embedded localization,
cultivating innovation cluster is necessary.
Linking skills and pooling resources both inside
and outside clusters/cities are the right way to meet
the challenges posed by globalization and the
increasing dynamism of structural change.
TV : Family on the Go / Legend of
Entrepreneurship
35
2 THEORETICAL THINKING
36
New wine in the old bottle

China’s industrial cluster development and land
exploitation always stick together.


“Industrial cluster” are the latest fashions.




Success made by new urban zones and industrial parks has
encouraged central ministries and local governments to
property-driven development.
We could not say that only firms gather in somewhere and it will
develop.
We could not say only these firms develop in a certain period
can they have permanent competiveness advantage.
We could not say that a locality only needs to create an “supply
chain”, its economy will be well developed.
“new wine in the old bottle”. Like the form of “making
nest to lure birds” in the past.
37
From development zone
to industrial new town —“industrial real estate”
•Larger and lager
Areas
•More and more
functions
Industrial new town
•More and more
places are planned
Industrial park
Development zone
Make
money/
bobols
•More and more
ministries involved
•More and more
problems
?
vision/
mition
•More and more
empties?
38
Over-investment on development zone



Local government take real estate as a cornucopia of
collecting public investment.
So called “City management” - through urban planning
and land exploiting, local government may get
development fund within or outside budget to support
projects of infrastructure and city beautification.
Due to the land easy policy and low land price, in
many cities of China the areas expand blindly. Local
governments stimulate land exploitation of
development zones excessively.
39
Mushroom or poisonous mushroom?
High-tech zone
achievement


In 105 high and new tech
development zones,
There are about ten
million employments, 13
trillions business income.
The industrial output
value account for 13%
and the export account for
16.7% of the nation’s total.

Example: Ministry of
Culture has been out of
Control for the presence
of over 2500 cultural
parks in China.
The policy should be
inclined to real economy
but not industrial real
estate and other
speculative market.
Good cluster or bad cluster?
Warning: real estate bubbles





Free-tax zones
New Technology Cities(industrial park)？

Low Carbon

Ecological


High Tech

Innovative

……
Headquarter Base？
Industrial Relocation Parks?


South Korea Entrepreneurs


Zhejiang Entrepreneurs

Guangdong Entrepreneurs

……
Theme Park？

Innovative（cartoon, film……）

Manufacturing（clothing, cement,
sugar……）

Outsourcing(software, biotech……）

……
Investors

Central government

Local government
Agents attracted

The World 500 biggest ?

Overseas Returnees

State-owned Enterprises

Residence, Tourism？
Where are the first seed from？
Development opportunity,
Condition, Mechanism？
41
生态城
“Eco towns/cities”
42
What kind of agglomeration we eed？
Location is now "proximity" to know-what,
know-how, and know-whom - its local
clusters of knowledge not companies and
assets.
Industrial
agglomeration
？
Industrial
real estate
Industrial upgrading
•A new industrial space to foster a new industry?
•Does it have new start-ups?
•Local entrepreneurship?
•Institution for collaboration？
•Potential to create industrial community?
43
Local cluster and innovation

Porter(1990)
defines cluster as
“geographic
concentrations of
interconnected
companies,
specialized
suppliers, service
providers, firms in
related industries,
and associated
institutions.”


Industrial clusters are a group of firms
and institutions (agents) with spatial
proximity, industrial linkages and
mutual influences.

Through agents’ linkage and action,
external economy are realized to
lower cost.

Through mutual trust and cooperation,
innovation are promoted in learning
milieu.
Learning and innovation in clusters
may, or may not occur. (Wang Jici, 2005;
Wang Jici, Beyond Cluster, 2010)
44
A danger of using cluster approach

The ambiguities of cluster concept





Localization and urbanization
The site of operation and the site of interaction
The global-local discourse of industrial linkage
The confusion of the concentration based on knowledgeintensity and the concentrated dispersion based on labor
costs
For the reason of the ambiguities of cluster concept,

There is a danger of using cluster approach as the
fashionable next ‘new thing’ in economic development.
45
Making connections is important

Usually, the main purpose of firms moving to industrial
parks to get preferential infrastructure and policies.




Despite of near distance, there is little relation among them
because of differences in type of business, ownership, nation
and language.
Even there are firms which have production linkage in theory
but they could not connect each other because of differences
in technical standards.
Making real connections (~ “proximity”) in industrial cluster
need a couple of years even tens of years.
Therefore, it’s a risk to develop industrial properties in
some underdeveloped localities with few firms.
46
Cluster formation in developing countries:
concentrated dispersion
Global dispersion
Actors: MNC
flagships
……
Global outsourcing
Local concentration
Clustering effect
(Positive-negative)
Local Manufacturing
and service
Actors: Local SMEs, MNCs
Government, education/research
institution, Industrial association
47
Background of high-tech development in China
University and
research institutes
Reforms of S&T
system/education
system/ human
resource
management system
Central
government
863 project
Torch plan
Innovation-driven strategy
Marketing of
research result
Non-stateowned firms
High- and
new tech
zones
urbanization
New town construction
Hot of real estate
development
Development zone /
industrial park
Local government
Global shift
Fight for resources between local
High-tech hot
Off-shore outsourcing governments and between
Silicon valley effect
different department of central
government, GDPsm
Branch plant of MNCs
returning of
overseas Chinese
Clusters have “kinetic energy”
1 reduce cost
（the labour cost and environment
cost reduced are limited）
2 promote innovation
（in a condition of abundant
social capital）
Industrial parks
have “potential
energy”
1 Attract investment
from outside
2 create jobs
Factors of a park：
1 land and infrastructure
2 Preferential policies
In China, lots of spontaneous
clusters are not innovative
Factors form a cluster：
1 critical mass
2 geographical proximity
3 industrial linkage
In China, successful and
fake industrial parks are
mixed up.
Parks and clusters: concepts distinction and overlap
park
（geographical
proximity of
actors）
cluster
（geographical proximity of
actors with functional
linkages）
Create cluster within the park（ideal situation）
Long term positioning, be patient!
Activities for
interaction
Supporting
institution
enterprises
Universities/
Research institutes
government
High hope and hard reality

Industrial estate has become a tool of increasing GDP
as a political achievement for local government, and
acquired preferential policies to be offered to
manufacturing.


Since 2007, Vantone has engaged in industrial estate and chosen a
leading firm in home applicances, TCL as partners. After 30-year
development, TCL has occupied industrial estate (production bases) of
more than million sq. m in Guangzhou, Inner Mongolia, Chengdu,
Wuhan and Wuxi. In the early 2008, Vantone (55%) and TCL (45%)
set up a joint venture of total 250 million Yuan and signed an
agreement to further promote cooperation in the industrial estate field.
The low benefits of infrastructure affect local
government’s ability to pay back the loans of the banks.

Of the leans to local government in mainland China, 18.5% of total
loans for banks, nealy one in fifth could not be repaid. If that occurs,
the financial system will be in big predicament.
53
“Traps” of Specialization



“Specialization has brought economic growth to
localities”, this saying is based to present “specialized
towns”. However, in the context of globalization, urban
specialization will be with low-value-added growth.
Globalization leads to specialization and strengthen
specialization.
When moving to a good location for business in a
certain nation, this location may be specialization.


When foreign companies move their production activities
overseas, they will connect with their suppliers to invest in a
city to establish specialized manufacturing center.
Usually, it’s difficult for domestic firms to join this specialized
production system.
54
Regional/local Development Puzzle





exogenous vs. endogenous
Top-down vs. Bottom-up
Planned and Induced vs. Natural
Growth pole vs. Industrial cluster
Policy tool and development strategy
55
Conclusion
Implications of China’s industrial districts

Industrial clusters in China benefit both MNCs and NIS.



The key task facing China should be to foster
innovative industrial clusters instead of building more
“low road” ones.
Institution innovation is most important.


The clusters of China functioned very well for multinational
buyers and contract manufactures, but their roles for build
competitive advantage of the country and the region are
limited.
China needs to learn as quickly as possible not only in
adopting lessons from other industrial clusters but also in
seeking to position local industries in the global value chain
and in strengthening their competitiveness in the global
market.
Policies need to differ for different sectors.
56




①计划完成情况；
②取得的主要进展与成果；
③人才培养和国际合作与交流的成效；
Chapter 7 in Allen Scott and Golifoli (ed.): Development on
④资助经费的使用情况
the Ground: Clusters, Networks and Regions in
Emerging Economies, London: Routeledge, 145-164
57
Thank you.
Prof. Jici WANG
College of Urban and Environmental Sciences
Peking University, Beijing, 100871, China
[email protected]
58